$AEO shopping spree pays off for bulls

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Option traders have tripled their money in upside positions on Amercan Eagle Outfitters.

On Aug. 22, Investitute’s proprietary programs cited the purchase of 8,300 September $12.50 calls for $0.27 to $0.30 with shares at $11.19. This was a new position, as there was no open interest in the strike before the trade occurred.

Those calls traded for $0.96 this afternoon, more than tripling in value. The stock rose 20.4 percent in the same time frame, a large move but still one that paled in comparison to that of the options.

Long calls lock in the price where a stock can be purchased, gaining with a rally and providing leverage to the underlying shares. The contracts can quickly lose value if the stock stalls or pulls back but also carry less risk than owning the shares themselves.

AEO was up 3.48 percent today to close at $13.39. The clothing company rallied as beaten-down retailers showed some signs of life.

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Mike Yamamoto

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